It’s easy to think that internal misdoing is impossible in your organization. You have a solid team in place, and the idea that someone would take advantage of the company seems entirely far-fetched.
For the vast majority of businesses, this is true. In the hospitality industry, however, the frequency of adding new vendors and the constant paying of invoices can create a comfortable environment for fraud to go undetected. In fact, 78% of hospitality survey respondents have experienced asset misappropriation. This figure is significant, and you may be wondering how it’s possible.
You may be surprised to learn that almost 30% of internal fraud can be attributed to of a lack of internal controls. Not only that but that the accounting function alone accounts for over 16% of total fraud. Also, for companies still writing paper checks, it gets even worse – check fraud accounted for a whopping 77% of all fraud cases.
It’s a sobering reality, but it need not overwhelm you. AP automation technology offers many benefits which obviously can’t guarantee fraud prevention but can provide the capabilities to enforce process, along with the insight into potential process deviations or changes which may raise red flags.
Leverage Audit Trails
Among the many strengths of a digital ecosystem is the sheer amount of data at your fingertips at any given moment. Not too long ago, this exercise littered with filing cabinets, sticky notes, and hallway updates has become a mere click of the computer mouse. Did an employee make multiple updates to a specific produce supplier within a short amount of time? Was bank account data for a landscaping provider modified? Was an employee not typically associated with a given supplier unusually active with their invoices? Was a principal approver omitted from the process?
If suspicion arises, digital audit trails can provide granular detail on any aspect of the bill lifecycle. You can quickly access dozens of invoice, user, and payee attributes and who executed a given action, and precisely when it was performed.
Know Your Business
The hospitality industry inherently provides ample opportunity for internal theft, based on the fast-paced, nonstop nature of the industry. Register skimming, unusual tipping, and outright food, beverage or supply theft are just a few of the daily concerns to monitor. So while these are examples of physical theft eating into your margins, a more inconspicuous threat can be found in the accounts payable function itself.
So how can a busy business owner or accounting manager keep tabs on the pulse of their payables quickly and easily? While it may sound obvious, it simply comes down to knowing the business. By having a handle on averages, seasonalities, volumes, and pricing, a savvy owner can spot deviations from the norm. So while fraudsters are inherently resourceful and crafty, some telltale signs may be helpful to raise an eyebrow or pique your interest into a more in-depth dive:
- Invoices are missing important details, such as GL, class, location, or quantity.
- Vendor details include PO boxes or public emails, such as Gmail or Yahoo.
- Abnormal change to food and beverage unit costs
- Payments made on deliveries not received
- Approved amounts are just below the approval limits of a given user.
- Rounded invoice values ($25.00, $50.00, etc.).
- Invoice volume for a particular vendor is significantly higher than usual.
- After-hours platform logins and modifications to invoice and vendor bank account records.